The Nigerian government signed a $4.5 billion deal last week with US firm Vulcan Petroleum Resources and Nigeria’s Petroleum Refining and Strategic Reserve to build six new oil refineries with a combined capacity of 180,000 barrels (roughly 30 million litres) per day. Two of the plants are set to be operational within a year.
Commenting on the deal, Nigerian-born businessman Kola Aluko described it as a ‘landmark’ in the development of Nigeria’s industrial base.
“Nigeria is Africa’s top exporter of crude oil, but for too long the sector has been held back by inadequate refining capacity. This is a landmark investment and marks the start of a new phase in the expansion and diversification of the industry.”
Insufficient refining infrastructure has made Nigeria a net importer of processed crude and subject to global price fluctuations. Funded by foreign investors, the Vulcan deal will help the country meet its growing domestic fuel demand by developing its own infrastructure instead of continuing to rely on exports. The consortium has opted to build modular refineries – as such, each plant will be built and tested in the US before being shipped to Nigeria for reassembly near existing pipelines.
Nigeria has been pumping oil for over 50 years and the country still has three times more oil in reserves than its nearest rival Angola. However, at 2-2.5m barrels per day, Nigeria’s oil production is little changed from a decade ago and still well below the government’s target of 4m b/d. The Vulcan deal is set to increase refining capacity by almost ten per cent.
Aluko concluded, “The investors involved have made it clear that they see Nigeria as a good place to do business. This is exactly the kind of vision we need to make the industry more self-sufficient, more resilient, and more competitive.”